Stepping into 2023, the global financial environment witnessed a dynamic transformation. At the forefront of this evolution stands anti-money laundering (AML) regulations, exercising significant influence over financial institutions globally. There are pivotal regulations that mold the AML landscape across key regions. Sanction Scanner’s annual report analyzed these regulations.
Essential adjustments to the 6th Anti-Money Laundering Directive (6AMLD) and the groundbreaking Markets in Crypto Assets (MiCA) regulation within the European Union are at the forefront. Simultaneously, the United States introduced a strategic National Strategy for Combating Illicit Financing and the Responsible Financial Innovation Act, fortified by the Responsible Development of Digital Assets Executive Order. Asia contributes substantially to the global AML conversation through the ambitious Chinese Three-Year Action Plan and the Monetary Authority of Singapore's Notice 626. The MENA region assumes a crucial role in shaping the AML landscape with Turkiye’s Law No. 6415 and the United Arab Emirates' Guidance Rules for Digital Assets. Navigating the intricate terrain of AML compliance in 2023 necessitates a comprehensive understanding of these regulations.
|Amendments to the 6AMLD
|Markets in Crypto Assets (MiCA)
|Guidance Rules for Digital Assets (UAE)
|National Strategy for Combating Illicit Financing
|The Responsible Financial Innovation Act
|Responsible Development of Digital Assets Executive Order
|Chinese Three-Year Action Plan
|MAS Notice 626 (Singapore)
|Law No. 6415 (Turkiye)
The European Union (EU)
Amendments to the 6AMLD
One of the noteworthy updates within the EU's AML package includes the revised version of the Sixth Anti-Money Laundering Directive, commonly referred to as the 'new' 6AMLD. This modified directive encompasses a range of legal mechanisms and measures, addressing crucial elements such as the implementation of periodic national risk assessments to be conducted every four years. The framework also includes guidelines for Financial Intelligence Units (FIUs) to analyze and submit suspicious transaction reports (SARs).
The amendments also bring clarity to the requirements for beneficial ownership information, introduce the implementation of cross-border asset registries, and establish public oversight bodies tasked with monitoring EU self-regulatory entities. Notably, the updated 6AMLD aims to refine regulations concerning collecting personal data within the AML and countering the financing of terrorism (CFT) measures.
Markets in Crypto Assets (MiCA)
Crafted to navigate the complexities of crypto assets and stablecoins, MiCA introduces a set of rigorous compliance requirements tailored for crypto asset service providers. Among these mandates, stablecoin issuers are obligated to maintain sufficient liquid reserves to address potential large-scale withdrawals and obtain explicit authorization from regulatory authorities.
Noteworthy within MiCA is that crypto asset service providers operating within the EU undergo scrutiny, with the establishment of a public record documenting non-compliant entities. The oversight falls under the purview of the European Banking Authority (EBA), ensuring adherence to the outlined regulations. Concurrently, the synchronized implementation of the Fund Transfer Regulation (TFR) with MiCA addresses concerns related to anonymity risks in crypto-asset transactions. TFR introduces compulsory measures, including the comprehensive collection of personal information for all parties involved in transactions surpassing €1,000, vigilant screening of transaction beneficiaries against sanction lists, and the provision of customer personal data to authorities upon request.
The United States
National Strategy for Combating Illicit Financing
The National Strategy for Combating Illicit Financing addresses critical issues, including the closure of security gaps vulnerable to exploitation through shell companies and cash real estate transactions. Moreover, it emphasizes the enhancement of law enforcement capabilities against illicit financing, ensuring robust measures to combat financial crimes.
Integral to the National Strategy is the commitment to improving the AML/CFT framework through compliance guidance, fostering information sharing, and allocating resources for effective oversight and sanctions. The strategy recognizes the evolving landscape of financial technology (fintech) and virtual assets, aiming to address associated risks and threats while capitalizing on their benefits.
The Responsible Financial Innovation Act
The Responsible Financial Innovation Act (RFIA) aims to establish a regulatory framework for digital assets in the US. This legislation designates the Commodity Futures Trading Commission (CFTC) as the primary regulator for digital assets and introduces reporting requirements for digital asset service providers. Under the purview of the CFTC, RFIA outlines key features, including oversight for entities issuing digital assets, reporting obligations to the Securities and Exchange Commission (SEC), new precautionary regulations for stablecoin issuers, and the classification of Decentralized Autonomous Organizations (DAOs) as commercial entities.
Responsible Development of Digital Assets Executive Order
The Responsible Development of Digital Assets framework proposes future regulatory controls on digital assets. It emphasizes the issuance of guidance and rules by the Department of the Treasury to address emerging risks in the digital asset ecosystem. The framework promotes collaboration between federal agencies and U.S. companies to provide regulatory guidance, fostering responsible development within the digital asset space. Additionally, efforts to enhance public awareness of digital asset risks are championed through initiatives led by the U.S. Financial Literacy and Education Commission (FLEC).
Chinese Three-Year Action Plan
China has initiated a three-year campaign to combat money laundering, emphasizing the protection of national security and social stability, as declared in an official government statement. Led by the People's Bank of China (PBOC) and the Ministry of Public Security, this campaign is ongoing in 2023 and is scheduled to extend until the conclusion of 2024. The government statement, accessible on the central government website, underscores the severity of the challenges in combating money laundering and expresses a resolute commitment to curbing its proliferation, along with associated crimes.
The comprehensive initiative involves the collaboration of 11 Chinese government bodies. Coinciding with the launch of this campaign, China has also unveiled revised rules aimed at fortifying the anti-money laundering capabilities of financial institutions. This concerted effort reflects China's dedication to implementing stringent measures and regulations to address the persistent threat of money laundering, aligning with broader national security objectives and reinforcing social stability.
MAS Notice 626 (Singapore)
MAS Notice 626 in Singapore outlines AML/CFT requirements for financial institutions operating within the country. The notice mandates that these institutions establish robust controls to detect and deter the flow of illicit funds through Singapore's financial system. Key components of these controls encompass the imperative for financial institutions to identify and have a thorough understanding of their customers, including beneficial owners. Regular account reviews, monitoring, and reporting of any suspicious transactions are also integral elements of the prescribed AML/CFT measures.
Within MAS Notice 626, specific AML/CFT requirements for banks are articulated, encompassing crucial aspects such as risk assessment and mitigation, customer due diligence (CDD), reliance on third parties, correspondent banking and wire transfers, record-keeping, suspicious transaction reporting (SARs), as well as the formulation and implementation of internal policies, compliance measures, audit protocols, and training programs.
Law No. 6415 (Turkiye)
Turkiye’s Law No. 6415, titled "On The Prevention Of The Financing Of Terrorism," is structured into several chapters, each addressing specific aspects related to combatting the financing of terrorism.
The initial chapter, "Purpose, Scope, and Definitions," outlines the legislative intent and scope of the law. It specifies that the law is designed to facilitate the effective fight against terrorism and the financing of terrorism, aligning with international conventions and United Nations (UN) Security Council Resolutions.
Chapter two, focusing on "The Offence of the Financing of Terrorism," details prohibited acts related to providing or collecting funds for specific terrorist activities. Article 3 lists forbidden acts, while Article 4 establishes the offense of financing terrorism, prescribing penalties for individuals involved in providing or collecting funds for terrorists or terrorist organizations. The law also addresses enhanced penalties for organization founders, managers, or members. These provisions underscore Türkiye’s commitment to combatting the financing of terrorism and ensuring legal measures to prevent and punish such activities.
Guidance Rules for Digital Assets (UAE)
The United Arab Emirates (UAE) introduced comprehensive regulations for digital assets through the Digital Assets Law, as outlined in Consultation Paper No. 4 of 2023. Acknowledging the vast potential and considerable market opportunities within the trillion-dollar asset class of digital assets, including cryptocurrencies, NFTs, stablecoins, and security tokens, the proposed legal framework aims to go beyond regulating and enforcing sanctions on practical applications. Instead, the focus extends to exploring the broader legal implications of blockchain technology and the diverse use cases of digital assets.
While international legal developments and judgments have started providing clarity, the exact nature and impact of digital assets remain subjects of ongoing debate. The UAE's Dubai International Financial Centre (DIFC) is now seeking public consultation on its Digital Assets Law proposal. This initiative underscores the commitment to creating a robust and adaptable regulatory environment for the evolving landscape of digital assets.